A quarter of tech companies may not survive no-deal Brexit
One in four London tech companies fear they would not survive the economic impact of a no-deal Brexit, according to new research released today by Tech London Advocates, the independent network of more than 9,000 tech leaders, experts and investors.
After the economic disruption caused by the global health pandemic, London tech companies have reported significant concerns about their ability to raise investment or attract the talent they need to grow in the case of a no-deal Brexit.
Nearly two-thirds of tech companies said they felt the Government is not doing enough to sufficiently protect the tech sector from the economic impacts of COVID-19, despite unprecedented economic packages from the Treasury.
Around 75% of tech companies warned that the combination of the current pandemic and Brexit would make it significantly harder to raise investment capital moving forwards. According to the report, 60 per cent of tech leaders also fear losing access to skilled international talent once the UK’s transition period ends with the European Union as a direct result of Covid-19.
If concerns raised in the survey findings are proved correct, London could expect to see thousands of tech startups go into administration as a direct result of the combined impact of COVID-19 and a no-deal Brexit. This comes after September saw the highest number of UK startups go into administration for the last ten years.
However, despite widespread concern surrounding access to talent and capital, over half (50.27%) of respondents said that they remained confident that the UK could remain a world-class centre for technology innovation.
Russ Shaw, founder of Tech London Advocates & Global Tech Advocates, said: “There are mounting fears that COVID-19 has dramatically impacted the tech sector’s Brexit readiness and the ability of our tech companies to source the talent and capital needed to grow, if we leave the EU under the conditions of no-deal.
“Exiting the Single Market and reverting to Third Country status for trade in services could be a significant blow for this country’s most innovative businesses.
“The tech sector is now of greater strategic importance to Britain than ever before. This government has placed future industries at the heart of its strategy to level-up the regions, economically recover from COVID-19 and define our new position on the world stage, post-Brexit. I urge officials to continue pursuing a deal on services with the EU and to safeguard the UK’s digital economy from the grim reality of a no-deal Brexit.
“I have complete confidence that Britain’s tech entrepreneurs will rise to the challenge of Brexit under the new conditions created by COVID-19. But it is critical that we work collectively on addressing the challenges that this research makes very evident.”
Priya Guha, Venture Partner at Merian Ventures, said: “This survey shows that uncertainty over access to talent or capital could put the UK's status as Europe's top tech hub in jeopardy. This is no longer about whether you believe in Brexit; this is about providing British tech businesses with the clarity they need to be able to operate effectively from 1st January 2021. And about ensuring that the digital economy can be the UK's engine of post-pandemic growth."
Andrew Roughan, Managing Director, Plexal, said: “The one-two punch of the COVID-19 pandemic and Brexit uncertainty has had an unimaginable impact on London’s tech sector. Although the flow of capital into London’s digital businesses has shown recovery, it is still the early-stage companies seeking funding for the first time that will suffer the most at the hands of further economic turmoil.
“While government economic support packages have been a vital lifeline for many of London’s tech companies, the long-term stability of the sector will be based on supporting early-stage businesses to ensure we do not lose a generation of entrepreneurs.”